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SAS Business Analytics India
Feb 17, 2012
Economy & Finance
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Transcript of "Risk Management"
1. make connections • share ideas • be inspiredIndia’s Largest Analytics ForumIntegrated Risk ManagementM K JainGeneral ManagerSyndicate Bank Copyright © 2011, SAS Institute Inc. All rights reserved.
Agenda • Drivers for IRM • Convergence of Requirements • External Drivers • Desired Risk Framework • Indian Risk Management ImperativeCopyright © 2011, SAS Institute Inc. All rights reserved.
Drivers for IRM : Vision of Future Bank Leading banks are investing in the ability to provide account holder “event” level information to manage customer relationships, risk, regulatory drivers, and return on capital. “The goal is to increase quality of relationships with profitable customers” Enhanced Operational Enhanced Customer & Capital Advantage Relationships•Capital Allocation is directly tiedto accounts & product profitability •Siloed Channels replaced with Events•Risk processes are as integral asaccounting & forecasting •Products are offered at anticipate life or firm level events•Velocity of financial analysis ischanging •Customer RM balanced by Risk RM Enhanced Regulatory Reporting Capability •Proactive risk & financial reporting to internal and external agencies •Ability to report in multi jurisdictions •Ability to create risk and finance exposure – price once & distribute often3 Copyright © 2011, SAS Institute Inc. All rights reserved.
Drivers for IRM : Convergence of requirements Marketing • Customer capacity There is a “convergence” between Risk, Marketing • Business Segments to Develop & Grow and Financial data that Financial Services organizations utilize every day • Market Segment Penetration Enterprise View Risk • Risk Factors Influence Buy • Customer credit worthiness Decisions • Exposures • Profitable Markets Identified • Geographic Concentration • Proactive Capital Management via “Firm Wide” stress testing Finance • Loss Reserves and Allocations Quickly link Marketing and Sales direction with • Accounting products that provide long term value while determining the “credit worthy” customers to sell • Capital to. • ROI4Copyright © 2011, SAS Institute Inc. All rights reserved.
Drivers for IRM : External DriversExternal Environment Opportunities Integrated Infrastructure Increasing regulatory pressure and risk of sanctions Granular, consistent, integrated risk & data processes esp Investment and Universal banks Timely and accurate data access Risk process embedded in the business management process Falling business margins/profits in retail banking Synchronize group & BU Risk process Enable more sophisticated Stress Testing using more granular Credit Crunch/ Sub-Prime – identification of new data & improved analytics bubbles Volatile Markets – high speed trading Methodology Integrated risk management Risk adjusted return, return on equity for portfolioBusiness Drivers Economic & business events impact to integrated risk profile of portfolio Maximise risk adjusted returns Improve risk management Policies Regulatory Compliance Efficient Capital Management, including cash management. Diverse Funding Customer retention/CVM Reduced Funding, Concentration, Business & Economic Risk Risk impact comprehended in customer decisions & pricing Business continuity/stability/optimization Disclosing risk/transparency Operational effectiveness/reduce costs5Copyright © 2011, SAS Institute Inc. All rights reserved.
Risk Landscape – Traditional Silo View Integrated Vision / Risk Aggregation / Control Market Risk Credit Risk Operational Risk Business Risk Data Warehouse6Copyright © 2011, SAS Institute Inc. All rights reserved.
Autopsy of the Crisis 2 Macro environmental parameters - Reversal in trend of rising real 3 estate prices coupled with 1 falling interest rates Global Crisis 4 57Copyright © 2011, SAS Institute Inc. All rights reserved.
Benchmarking the Indian Environment Structural Maturity Instrument Sophistication Analytics Maturity Conservative Orientation People CapabilitiesPortfolio Complexity Data Availability & Quality Central Bank Portfolio Complexity Maturity & Direction IT System Support Susceptibility to Risk Culture Global Events8 Copyright © 2011, SAS Institute Inc. All rights reserved.
Desired Risk FrameworkNew View – Integrated Risk Landscape Yesterday – Today - Tomorrow Reporting/Management Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Market Risk Rep-Risk Liquidity Credit Risk Oper. Risk xx-Risk Scenario Generator Micro economic & Macro-economic/external factors Financial Market endogenous factors Labour Market Productivity Environment ….. 9 Copyright © 2011, SAS Institute Inc. All rights reserved.
Indian Risk Management Imperatives The concept of risk management, merely as a ‘control function’ is definitely unsuitable at best and misleading at worst, in the current environment and has to be viewed as a part of ‘shareholder value management’. The movement from ‘control’ to ‘value’ management function is the crux of modern risk management10 Copyright © 2011, SAS Institute Inc. All rights reserved.
Capability Enhancement People Analytics Data Markets & Instruments11Copyright © 2011, SAS Institute Inc. All rights reserved.
Capability Enhancement People Risk professionals with specialized knowledge & skills in risk management Technology professionals with specialized knowledge in risk systems Analytics professionals with specialized knowledge & skills in risk analytics Build people capabilities over time12 Copyright © 2011, SAS Institute Inc. All rights reserved.
Capability Enhancement Acquire analytics tools and Analytics systems Acquire capabilities across predictive, prescriptive and investigative analytics Cross functional analytics capabilities to build economies of scope Acquire packaged analytics Build analytics capabilities over time and analytics platforms13 Copyright © 2011, SAS Institute Inc. All rights reserved.
Capability Enhancement Data Build data repositories in diverse areas to support risk analysis Clean data sets for demographic, transactional, psychographic, response profiling Plan, build, revisit, extend, Build data resources over time use 14 Copyright © 2011, SAS Institute Inc. All rights reserved.
Capability Enhancement Markets & Instruments Build a road map for capabilities to sophistication in Markets and Instruments Plan and develop readiness via policies, processes and systems Learn from globalPrepare for sophisticated markets & developments and guard instruments over time against global mistakes15 Copyright © 2011, SAS Institute Inc. All rights reserved.
Themes Selection Process Transparency and rigor Domain driven selections Weightage to technical capability Overseeing Implementations Quick re-alignment of priorities Maintain time discipline Vendor Management Consolidation with committed partners16Copyright © 2011, SAS Institute Inc. All rights reserved.
Themes (cont’d) Reserve Bank Directives on next wave in risk management Creating a Risk Culture Imbibe risk culture across organization Risk Governance Framework Governance structure covering committee structure, oversight Governance processes Special emphasis on risk, project and technology governance 17 Copyright © 2011, SAS Institute Inc. All rights reserved.
“There is a misperception that all banks are expected to be up and running come Timeline, but the idea is to do it right by starting with comprehensive self-assessments instead of just doing it early.”18Copyright © 2011, SAS Institute Inc. All rights reserved.
make connections • share ideas • be inspiredIndia’s Largest Analytics ForumThank YouM K JainGeneral ManagerSyndicate Bank Copyright © 2010, SAS Institute Inc. All rights reserved.
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